The Structure and Progression of SEISS Grants
The government launched SEISS as a series of grants. Each round reflected the changing economic conditions and evolving restrictions over time. The initial stages were rolled out in 2020 and early 2021, corresponding to different phases of lockdowns and public restrictions. By the end of the third round, the scheme had distributed billions of pounds in grants to millions of recipients.
The First SEISS Grant
The first grant covered losses for the period of March to May 2020 and provided 80 percent of the applicant’s average monthly trading profits. The grant was capped at £7,500 and paid in a single lump sum. To qualify, applicants had to meet several eligibility criteria, including demonstrating that they had been adversely affected by the pandemic. Additionally, they had to declare their intention to continue trading and confirm their eligibility based on their previous tax returns.
The Second SEISS Grant
The second round of SEISS support was made available from August 2020. While the eligibility conditions remained largely similar to the first round, the level of support decreased slightly. This time, the grant covered 70 percent of the applicant’s average monthly trading profits, again for a three-month period, with a cap of £6,570. The second grant continued to offer essential support but acknowledged that some businesses had resumed operations, albeit under restrictions.
The Third SEISS Grant
The third grant came in response to further lockdown measures introduced in late 2020 and early 2021. It again covered 80 percent of average trading profits and applied to a three-month period. The eligibility rules for this round were slightly more targeted, requiring claimants to show they had been impacted by reduced demand or were temporarily unable to trade due to COVID-19. This grant addressed ongoing economic uncertainty and catered to sectors still unable to operate fully.
Who Was Eligible to Claim SEISS?
Eligibility for SEISS was primarily based on tax return data and trading status. To access the grants, individuals needed to be self-employed or members of partnerships and submit Self Assessment tax returns. There were several key conditions applicants had to meet in order to qualify for any of the SEISS grants.
Self-Employed Status and Trading Profits
Applicants needed to have trading profits of no more than £50,000 per year, and the majority of their income had to come from self-employment. This meant individuals whose primary income came from other sources, such as employment, pensions, or property, were excluded from the scheme.
Tax Return Filing Requirement
One of the most important eligibility requirements was submitting a Self Assessment tax return for the 2018/19 tax year. This requirement allowed HMRC to calculate average trading profits and determine whether the individual qualified for support. If someone had not submitted their return by the relevant deadline, they could not access SEISS, regardless of their financial situation.
Adverse Impact Declaration
Applicants were required to declare that their business had been adversely affected by the pandemic. HMRC did not define the term strictly but offered examples that included reduced demand, supply chain disruptions, or temporary closure. Importantly, applicants also had to declare that they were still trading or intended to continue trading in the future.
Ineligibility for Property-Based Income
Those who earned income primarily from property, including landlords and individuals with furnished holiday lets, were not eligible for SEISS. This exclusion applied even if such individuals operated their property portfolios in a business-like manner. The scheme was strictly reserved for those generating income through trading activities.
Online Application Process
The application process for SEISS was conducted entirely online through HMRC’s portal. After verifying eligibility, HMRC issued a grant reference number and deposited the funds directly into the applicant’s bank account. In most cases, funds were received within six working days. Applicants were advised to keep records of all communication and grant amounts received for future tax reporting.
Tax Treatment of SEISS Grants
While SEISS grants offered crucial support during a challenging period, they were not tax-free. From the outset, the government clarified that any grants received under SEISS would be subject to both Income Tax and Class 4 National Insurance contributions. This meant that recipients needed to consider their SEISS income when calculating their total tax liability for the relevant financial year.
Tax Year of Receipt Determines Reporting Year
SEISS grants must be reported in the Self Assessment tax return for the year in which the grant was received. The first three grants were paid out before 6 April 2021, making them taxable income for the 2020/21 tax year. Therefore, self-employed individuals were required to declare the full amount of these grants on their 2020/21 tax return.
The fourth and fifth grants, introduced later in 2021, were received after the start of the 2021/22 tax year. These were to be reported in the Self Assessment return for that year, which had a filing deadline of 31 January 2023. It was essential for recipients to keep clear documentation to differentiate between grants received in different tax years.
Dedicated SEISS Field on Tax Return
To simplify the reporting process, HMRC introduced a specific field on the Self Assessment tax return for SEISS grants. This section was pre-labelled, and individuals were required to enter the total SEISS amount they received in the relevant tax year. Including the grant in this field ensured that it was properly taxed and accounted for in the overall tax liability.
It was important not to include SEISS income in the regular business turnover section of the return, as this could distort calculations for other reliefs or allowances. The separate entry ensured clarity and helped avoid any unintended tax implications.
SEISS and National Insurance Contributions
Alongside Income Tax, SEISS grants were subject to Class 4 National Insurance contributions. These contributions are calculated based on trading profits and apply to self-employed individuals who earn above a certain threshold. As SEISS grants counted toward total trading income, they could influence the amount of National Insurance due.
Some individuals, particularly those near the Class 4 threshold, found themselves unexpectedly liable for National Insurance when their SEISS grants pushed their taxable income above the threshold. It was therefore important to perform accurate calculations and, if necessary, seek professional advice.
VAT Considerations
A common question among grant recipients was whether SEISS payments would affect their VAT status. The VAT registration threshold in the UK was set at £85,000 at the time. However, HMRC clarified that SEISS grants did not count toward taxable turnover for VAT purposes.
This clarification was significant, especially for sole traders and small businesses operating near the threshold. By excluding SEISS from VAT turnover, HMRC prevented the administrative burden of unnecessary VAT registration, ensuring that businesses could focus on recovery rather than compliance complications.
Handling Overpayments and Errors
Mistakes in SEISS applications were not uncommon, particularly in the early stages of the scheme. Some individuals inadvertently claimed too much, while others realised after the fact that they did not meet the eligibility criteria. In these cases, HMRC required that the overpaid amount be returned.
Applicants had 90 days from the date of receiving an incorrect grant to notify HMRC and arrange repayment. Failure to do so could result in penalties, particularly if the grant was retained knowingly despite ineligibility. HMRC provided clear instructions on how to repay excess amounts through their online platform.
It was advised to act quickly and proactively if a mistake was identified. Repaying the grant voluntarily and in a timely fashion significantly reduced the risk of penalties or further action.
Deferred Payments and Time to Pay Arrangements
During the pandemic, many self-employed individuals deferred their July 2020 payment on account to help with cash flow. By the time these payments were due in January 2021, financial pressures still persisted for many.
To accommodate these challenges, HMRC allowed individuals to set up Time to Pay arrangements. These payment plans enabled taxpayers to spread their liability over a number of months, avoiding lump sum payments that could cause further strain. The option to use these instalment plans applied to deferred payments as well as SEISS-related tax liabilities.
Time to Pay arrangements were accessible online, but individuals were encouraged to engage early to avoid last-minute issues. Missing the deadline or failing to arrange a plan could result in interest or penalties.
Shifting the Focus: Later SEISS Grants and Expanded Eligibility
As the COVID-19 pandemic continued into 2021, the government faced mounting pressure to extend financial support for self-employed individuals whose income remained unstable. Responding to the prolonged disruption, the Self-Employment Income Support Scheme (SEISS) was extended to include a fourth and fifth grant, covering losses incurred between February and September 2021.
These two additional grants were critical in supporting individuals through the later stages of lockdown and into the gradual reopening of the economy. Not only did the fourth and fifth rounds of support offer financial aid, but they also addressed gaps in previous eligibility rules, allowing more individuals to qualify based on updated income information.
Expanding Access: New Eligibility for the Fourth and Fifth SEISS Grants
The introduction of the fourth grant marked a significant shift in the way eligibility was assessed. For the first time, the government included information from the 2019/20 tax year, allowing recently self-employed individuals to qualify for support.
Previously, applicants were required to have submitted a tax return for the 2018/19 year, excluding many who had only begun trading in 2019/20. The policy change meant that individuals who filed their first tax return for the 2019/20 year by the midnight deadline on 2 March 2021 became eligible to apply for support in the fourth and fifth rounds.
This extension of eligibility provided relief to an estimated 600,000 additional self-employed individuals, many of whom had been operating without government assistance for the first year of the pandemic.
The Fourth SEISS Grant: Details and Application Process
The fourth SEISS grant opened for applications in late April 2021. It covered losses sustained between February and April 2021 and, like the first and third grants, offered up to 80 percent of average monthly trading profits over a three-month period. The total grant was capped at £7,500 and paid as a single lump sum.
Applicants had to demonstrate that they were still trading or intending to continue trading and that their business activity had been significantly reduced due to the pandemic. HMRC continued to operate a self-declaration system, requiring claimants to confirm eligibility as part of the application process.
For those newly eligible due to filing a 2019/20 tax return, it was essential that the return was complete and submitted by the March deadline. Failure to do so would result in ineligibility, even if all other conditions were met.
The Fifth SEISS Grant: Graduated Support Based on Turnover
The fifth and final SEISS grant introduced a more nuanced structure, aimed at targeting the level of support more closely to the level of impact suffered. This grant covered the period from May to September 2021 and became available for claims from late July 2021.
What made the fifth grant different was the introduction of a two-tier system based on the reduction in turnover:
- Those whose turnover fell by 30 percent or more received 80 percent of three months’ average trading profits, capped at £7,500.
- Those whose turnover fell by less than 30 percent were eligible for 30 percent of the same calculation, capped at £2,850.
To calculate the appropriate level of support, applicants were asked to compare their turnover for the 2020/21 tax year with that of 2019/20. This required access to accurate records for both periods and introduced a new layer of complexity into the claim process.
Applicants needed to retain evidence of how they calculated their turnover and the percentage reduction, in case HMRC requested proof at a later date.
Reporting the Fourth and Fifth Grants on the 2021/22 Tax Return
SEISS grants were always taxable in the year they were received. Since the fourth and fifth grants were paid after 6 April 2021, they were taxable for the 2021/22 tax year and had to be reported on that year’s Self Assessment tax return.
HMRC again provided a dedicated field on the tax return form for SEISS income. This ensured that grants were taxed appropriately without being mistaken for standard trading income or affecting calculations for other reliefs.
All grant recipients were required to include the full value of any SEISS payments received during the tax year in the appropriate field. Failure to report SEISS income correctly could result in underpaid tax and potential penalties.
National Insurance and SEISS Income
As with earlier SEISS grants, the fourth and fifth grants were subject to Class 4 National Insurance contributions in addition to Income Tax. These contributions are calculated based on total taxable trading income, which includes SEISS grants.
For many individuals, the inclusion of the SEISS income could affect the rate of contributions payable. Class 4 National Insurance becomes payable once profits exceed a lower threshold, and higher contributions apply above a second threshold. Accurate reporting of SEISS grants was crucial for ensuring proper calculation of both Income Tax and National Insurance.
Those who found themselves unexpectedly above the higher threshold due to the inclusion of SEISS income were encouraged to review their financial planning and consider setting aside funds in advance of their payment deadlines.
Record-Keeping and Supporting Documentation
Given the introduction of turnover-based support in the fifth SEISS grant, accurate record-keeping became even more important. Applicants were expected to maintain clear records of their income, expenses, turnover calculations, and any relevant correspondence with HMRC.
These records not only supported the initial application but were also essential in the event of an HMRC review. If a claim was audited, the individual would need to provide documentation demonstrating how they arrived at their eligibility and the level of support received.
Recommended documents included:
- Tax returns from 2019/20 and 2020/21
- Bank statements showing business income
- Sales records or invoicing systems
- Notes explaining the impact of COVID-19 on trading activity
While many self-employed individuals are already accustomed to keeping detailed records, the specific requirements of the fifth grant made comprehensive documentation a necessity.
What to Do if You Received an Incorrect Grant
Some individuals may have received SEISS grants in error. This could be due to a change in circumstances, incorrect eligibility assessment, or a miscalculation of trading profits or turnover reduction.
If you received a grant to which you were not entitled, HMRC required that you notify them within 90 days of receipt. This time limit applied to all rounds of SEISS, and failure to comply could result in penalties.
Repayment could be arranged online via the HMRC portal. If you were unsure about your eligibility or the accuracy of your claim, you were encouraged to seek guidance from an accountant or tax professional.
Voluntary repayment of incorrectly claimed grants was generally viewed more favourably than withholding or ignoring the issue. Proactively addressing discrepancies helped reduce the likelihood of additional interest or enforcement action.
SEISS and Other Forms of Support
Some individuals who received SEISS support may also have accessed other forms of government assistance. This included bounce-back loans, local authority grants, or other sector-specific schemes.
It was important to understand how different support packages interacted with one another. In some cases, claiming multiple forms of support did not affect eligibility for SEISS. However, in other instances, overlapping claims could require careful reporting to ensure compliance.
Each grant or loan had its own reporting requirements and tax treatment. For example, SEISS grants were taxable income, but some local authority grants were not, depending on their nature and the structure of the business. Ensuring that each form of support was accurately recorded and declared in the appropriate place on the tax return helped reduce the risk of future tax problems.
Using Payment Plans to Manage Tax Liabilities
As SEISS income increased taxable profits for many self-employed individuals, some found themselves facing higher-than-expected tax bills. For those unable to pay in full by the deadline, HMRC continued to offer Time to Pay arrangements.
These installment plans allowed individuals to spread their tax bill over a number of months, making it easier to manage cash flow and maintain financial stability. To qualify, you needed to submit your tax return on time and use HMRC’s online self-service portal to set up the payment plan.
It was important to act early, as interest could still accrue on the unpaid balance. Those who delayed filing or attempted to set up plans after the due date risked losing access to the flexible payment option.
Preparing for the Future
While SEISS was a time-limited scheme, the experience of applying for and reporting these grants served as a valuable lesson in financial planning and tax compliance for many self-employed individuals.
Going forward, keeping accurate records, submitting tax returns on time, and understanding the relationship between government support and taxable income remain essential parts of self-employment. Future government schemes may also rely on tax return data to assess eligibility, making it more important than ever to ensure that filings are accurate and up to date.
Understanding Ongoing Tax Obligations
While the Self-Employment Income Support Scheme (SEISS) officially concluded in September 2021, its tax and compliance consequences continue to affect self-employed individuals and partnerships across the UK. After receiving any grant, individuals were required not only to report it correctly on their Self Assessment tax return but also to retain records and manage their overall tax position in light of the additional income.
With HMRC taking a close interest in SEISS claims, including random audits and follow-up investigations, recipients of the grant needed to ensure that their financial and tax reporting remained fully compliant with the scheme’s requirements and broader tax law.
Key Reporting Principles for SEISS Income
One of the most important points to remember is that SEISS grants are taxable income. They must be reported in full on the Self Assessment tax return for the year in which they were received. Each tax year has a separate field on the return to enter SEISS income.
For example:
- The first three SEISS grants, paid before 6 April 2021, were to be reported in the 2020/21 tax return.
- The fourth and fifth grants, paid after 6 April 2021, were reportable in the 2021/22 tax return.
The inclusion of SEISS income affects both Income Tax and Class 4 National Insurance contributions. Recipients were advised to review how the grants impacted their overall liability, especially where the combined income crossed thresholds that triggered higher tax rates or additional payments.
Distinguishing SEISS Grants from Other Income
SEISS grants were not treated in the same way as typical business income. While they were taxable, they were not to be included in the turnover or gross receipts reported on the self-employment pages of the tax return. Instead, HMRC created a separate field specifically for SEISS income.
Entering the grant income incorrectly in the turnover section could result in an overstatement of profits, which may lead to overpaid tax or eligibility issues for other reliefs and allowances. Equally, failing to declare SEISS income at all would constitute an omission that could trigger HMRC penalties or prompt an inquiry.
Understanding the layout of the Self Assessment tax return and using the designated field correctly was vital in ensuring that SEISS grants were reported appropriately and taxed as intended.
Record-Keeping Expectations
HMRC expected SEISS recipients to maintain records that supported their eligibility and the amounts received. This extended beyond standard bookkeeping practices to include documentation that proved the business had been adversely affected by the pandemic during the relevant periods.
Acceptable forms of evidence included:
- Business bank statements showing reduced or irregular income
- Cancelled orders or contracts
- Communications with clients regarding paused or terminated projects
- Evidence of supply chain disruptions or operational limitations
Keeping these records for a minimum of five years following the tax year in question was recommended. If HMRC chose to investigate a claim, these documents could be used to defend the accuracy of the submission and demonstrate that the claim was made in good faith.
Addressing Common Errors in Reporting
Despite HMRC’s efforts to streamline the process, errors in reporting SEISS grants were not uncommon. Some of the most frequent mistakes included:
Incorrect Grant Amounts
Applicants sometimes misreported the amount of grant income they had received, either by estimating the total from memory or by including incorrect figures. It was important to reference HMRC’s official correspondence or personal tax account, which provided an accurate breakdown of SEISS payments made to the individual.
Reporting in the Wrong Tax Year
Another common mistake was including SEISS income in the wrong tax year, especially in cases where grants were paid close to the tax year-end. Since tax liability is based on the date the money was received—not the date the grant period covered—recipients needed to use their bank records to confirm the exact payment date.
Double Reporting
In some cases, individuals reported SEISS income both in the designated SEISS field and within their business income. This led to inflated profit figures, potentially resulting in higher tax liabilities. The correct approach was to declare the grant only in the dedicated SEISS section to ensure it was included in total income without distorting business trading results.
Ignoring SEISS When No Trading Occurred
Some recipients who were unable to trade during parts of the grant period believed they did not need to declare the grant because they were not actively operating. This was a misconception. SEISS income was taxable regardless of whether the individual was trading during the year, as long as they received the grant payment.
What to Do If You Overclaimed
Mistaken claims for SEISS grants were subject to strict rules. HMRC required that individuals who received grants in error notify them within 90 days of discovering the issue. Failure to do so could result in penalties of up to 100 percent of the overpaid amount, depending on whether the error was deemed careless or deliberate.
If a grant was overclaimed, either in full or in part, the recipient needed to repay the excess. HMRC provided online tools to facilitate this repayment, and in cases where immediate repayment was not possible, alternative arrangements could be made.
Acknowledging and correcting errors proactively reduced the likelihood of further enforcement action. HMRC took a more lenient view of those who acted promptly to resolve the issue than of those who ignored or delayed their response.
How SEISS Affected Payment on Account
SEISS income also had implications for those who pay tax through the payment on account system. Payments on account are based on the previous year’s tax liability. Since SEISS grants increased taxable income, they could raise the amount due for both the balancing payment and the following year’s installments.
For some taxpayers, this resulted in an unexpected increase in payments on account. Reviewing your tax position early and budgeting accordingly helped to avoid surprises at the payment deadline.
Those who anticipated a fall in trading income in the current tax year could apply to reduce their payments on account. However, reducing payments inaccurately could lead to underpayment charges later, so any adjustment needed to be supported by reasonable estimates of current-year income.
Reviewing and Amending Submitted Returns
If an error was discovered after submitting a Self Assessment tax return, individuals had the right to amend the return within 12 months of the filing deadline. This applied to SEISS reporting mistakes as well.
Amendments could be made online through HMRC’s Self Assessment portal or submitted in writing. When amending SEISS-related entries, supporting records should be retained in case HMRC required clarification or additional information.
In circumstances where the error involved an overclaimed grant, an amendment to the return was not sufficient on its own. The grant also had to be repaid through HMRC’s repayment process, and the tax return updated to reflect the corrected figures.
Preparing for HMRC Compliance Checks
HMRC initiated compliance checks on SEISS claims to ensure that grants were issued correctly and that taxpayers reported them properly. Some of these checks were automated, while others involved direct contact with taxpayers requesting additional documentation.
Being selected for a check did not automatically imply wrongdoing. However, it placed the burden on the taxpayer to demonstrate that their claim was valid and their tax return accurate.
Those selected for review were typically asked to supply:
- Copies of relevant tax returns
- Business bank statements for the affected periods
- Records of trading activity before, during, and after the pandemic
- Evidence of income reduction and grant eligibility
Responding to HMRC inquiries within the requested timeframe and providing full, accurate information was essential in resolving checks quickly and avoiding escalated action.
SEISS and Future Grant Schemes
Although SEISS ended in 2021, the way the scheme operated has implications for how future support grants may be designed and implemented. The reliance on tax return data to determine eligibility underscores the importance of accurate and timely reporting for all self-employed individuals.
It is possible that future schemes—whether related to economic downturns, environmental challenges, or public health emergencies—may adopt similar frameworks. Maintaining compliant records and being proactive about tax responsibilities positions individuals to benefit from such schemes if and when they arise.
Avoiding Future Tax Complications
The experience of managing SEISS reporting provides valuable insights into good tax practice. To avoid complications in the future, self-employed individuals are encouraged to:
- Keep business and personal bank accounts separate to simplify income tracking
- Use accounting software to monitor income, expenses, and grant receipts
- Submit Self Assessment returns early to identify any tax issues well before deadlines
- Seek professional advice where circumstances are complex or unclear
These steps not only help with current tax compliance but also improve long-term financial planning and reduce the risk of errors or penalties.
Remaining Vigilant
Even though SEISS has ended, HMRC continues to assess its impact. Taxpayers should remain vigilant by reviewing their previous returns, especially if they suspect there may have been an error or oversight. Those who act early and voluntarily disclose any issues are more likely to resolve matters without serious consequences.
Conclusion
The Self-Employment Income Support Scheme offered a financial lifeline during an unprecedented period of economic uncertainty. For millions of self-employed individuals and partners in business, the grants provided vital income replacement at a time when trading was severely disrupted or completely halted due to public health restrictions.
However, receiving the SEISS grant was only part of the process. Reporting it correctly on the Self Assessment tax return carried equal importance. Understanding the year in which to declare the income, ensuring the grant was entered in the correct section of the return, and including it in both Income Tax and National Insurance calculations were critical steps in maintaining compliance. Mistakes in any of these areas could result in underpayment of tax or trigger HMRC investigations.
As the fourth and fifth grants introduced new eligibility criteria and a turnover-based assessment, claimants had to navigate added complexity, including the need for supporting documentation and more detailed record-keeping. Those newly eligible in 2021 had to act swiftly to file returns on time to benefit from the expanded access.
Even after the scheme concluded, its tax implications continue to be relevant. Many taxpayers found themselves adjusting to increased payments on account, reconciling overclaimed grants, or responding to compliance checks. The importance of careful record maintenance, timely disclosures, and accurate reporting has only become more apparent as HMRC reviews claims retrospectively.
For those managing their own tax affairs, SEISS serves as a reminder of how closely tax systems and government support can intersect. Staying organised, informed, and proactive with tax matters has become not only a best practice but also a necessary part of being self-employed in a rapidly changing economic landscape.
Whether you claimed one grant or all five, the key to long-term compliance lies in understanding your obligations and acting promptly when issues arise. As future government support may once again rely on Self Assessment data, the experience of reporting SEISS correctly places you in a stronger position to respond with confidence and clarity.